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Flexible Average Inflation Targeting and Inflation Expectations: A Look at the Reaction by Professional Forecasters
This Commentary examines the response of longer-run inflation expectations to the FOMC’s August 2020 announced switch to a flexible average inflation-targeting (FAIT) regime. The data indicate an upward shift in the lower end (below 2 percent) of the distribution of inflation expectations and a stronger anchoring of expectations around the 2 percent inflation objective following the announcement, evidence that is consistent with intended effects of the change in the monetary policy framework. To provide context, we also include a retrospective assessment of the response of inflation ...
Semiconductor Shortages and Vehicle Production and Prices
Vehicle production has fallen since the beginning of the pandemic recession. We investigate reasons for this decline. Manufacturers in this industry cite insufficient materials, including a lack of semiconductors, as increasingly responsible. Demand seems to be less of an issue. In fact, demand has been strong, and together with accelerating prices and sharply declining inventories, it suggests an insufficient supply of new cars. Our best guess is that the materials shortages and their effects on new car prices will subside within the next six to nine months.